Toxic Neighbors: Foreclosures and Short‐Sales Spillover Effects from the Current Housing‐Market Crash
Terrence M. Clauretie
University of Nevada, Las Vegas - Department of Finance
University of Nevada, Las Vegas - College of Business - Department of Economics
Economic Inquiry, Vol. 50, Issue 1, pp. 217-231, 2012
Do home foreclosures and short sales equally affect neighbors? On average, no‐default homes sell anytime up to 6 months after sales of foreclosed neighbors suffer a cumulative spillover effect of about 10%. Including the market trend, the total effect increases to 40%. Controlling for foreclosure effects, short sales do not produce additional spillover effects. We apply a modified hedonic model to estimate spillover effects on neighbors, using January 2008 to June 2009 home transactions from one of the most impacted housing markets. Our findings apply to severely “thin” markets and may not be true for stable markets. We show that accurate estimates of spillover effects require correcting for the market trend, two types of time and spatial price interdependence, and the endogenous neighborhood price.
Number of Pages in PDF File: 15
JEL Classification: R21, R22, R31, K2Accepted Paper Series
Date posted: January 6, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.704 seconds